MOUNTAIN VIEW, Calif. Synopsys Inc. Wednesday (Sept. 1) will roll out one-, three- and five-year "term value licenses," EE Times has learned. While the licensing approach might appear at first glance similar to the ill-fated three-year flexible access model (FAM) licenses used at Cadence Design Systems, Synopsys insists it's taking a different approach that won't artificially inflate revenues.
According to Synopsys, the new licensing approach will let customers tie tool purchases more closely to production cycles. And a new Wide Area Network (WAN) licensing option is expected to appeal strongly to multinational companies, many of whom are seeking more standardized pricing.
Both Cadence and its critics now acknowledge that overuse of the three-year FAM licenses in 1998 caused an artificial revenue growth that year, followed by a deep slump in 1999. The FAM approach has been criticized for front-loading revenues.
"FAM per se was not a problem," said Paul Lippe, senior vice-president for business and market development at Synopsys. "What became a problem was the way they [Cadence] did their revenue recognition and set expectations as to what the growth rate was."
Synopsys' approach differs, Lippe said, because Synopsys will not allow unlimited usage or sell access to future technology.
"Synopsys is being very conscientious about not emulating that [Cadence] model, and they've designed the term-value licenses to not front-load revenues in the same way," said Jay Vleeschhouwer, analyst at Merrill Lynch's Technology Research Group.
Lippe said the new licenses formalize practices already in place at Synopsys. "Everybody is moving to time-based licensing in one form or another," he said. The new approach, according to Lippe, might allow a customer to purchase three one-year licenses for $100,000 as opposed to one perpetual license for $100,000.
It's unclear, however, whether customers will end up paying more. Vleeschhouwer's report states that "customers will in effect be paying more for innovation, as seems only rational." Lippe declined to say whether prices will rise, but acknowledged that "any time you change the formula, there's some impact."
Lippe noted that there will be price increases in perpetual licenses for some customers, as a way of encouraging users to try the term-value approach. The WAN-based licenses will also carry an additional premium, but are expected to be attractive, given their support of highly dispersed design teams.
"In sum, Synopsys is attempting to augment its business model by making some evolutionary changes that leverage its position in the market and further distinguish it from competition," concluded the Vleeschhouwer report, which reiterated the company's "Buy" rating.